The housing shortage in Knoxville is not going to go away. One solution seems obvious: build more houses.
But home builders are currently facing major challenges, including high material costs, supply delays, a shortage of labor, and a lack of available properties.
And the pressure will only tighten: Knoxville needs about 40,000 additional homes by 2050 for the region’s growing population, according to Amy Brooks, executive director of Knoxville-Knox County Planning.
John Cook, President and CEO of Cook Bros. Homes and current president of the Home Builders Association of Greater Knoxville, said Brooks’ estimate seemed low compared to the demand he faces at work.
“In the homebuilding world, 2021 is basically the best and the worst of times,” Cook told Knox News.
A study by the National Association of Realtors estimates that the United States needs 6.8 million more homes to meet demand.
Home builders say it will take everyone working together to solve Knoxville’s supply problem while also upholding its reputation as an affordable place to live.
Calculating construction costs is a guessing game
Building homes right now is expensive and unpredictable.
It is difficult for builders to estimate how much a home will cost due to soaring material costs and manufacturing delays.
“Over the past 20 years we’ve always been able to know, down to 1%, what this house is going to cost us to complete,” Cook said. “Today, with my 20 years of experience, my level of confidence in our ability to predict how much it will cost us to build a house is not good.”
In May, the National Association of Home Builders reported that higher lumber costs pushed up the price of new homes by an average of $ 36,000.
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In addition to rising costs, the lack of available land in eastern Tennessee is a concern.
Developers buy land and prepare it for housing by installing the necessary infrastructure, including roads, utilities, sewer lines, electricity and more. Then they sell the empty land to a construction company to build houses.
Instead of selling individual plots to builders, many developers are pushing to sell entire subdivisions as infrastructure prices rise. Cook said purchasing such a property was not “financially feasible” for his business and other locally owned operations. The result is fewer convertible lots for local builders.
“The inventory of developable land is going down and it’s going down pretty quickly,” Brooks told Knox News. “We live in an area of the country that has a lot of topography. We have a lot of water. So the land that is still available to be developed is more difficult properties. I think it will prove to be more of a challenge for the development community. “
What is the result for buyers?
Buyers hoping to build a new home face long waits, high costs, and less choice.
Ahead of the pandemic, Cook said his company would agree to build homes up to nine months before construction begins. Estimating the price of a house was easy for Cook at the time. Despite the current strong demand, it is turning away buyers because it is impossible to keep a promise on the final cost.
“It hurts the real estate market because people can’t get a house as fast as they want, but as builders we have to protect ourselves and not sell something we can’t build at the agreed price. to, ”Cook said.
Cook told Knox News his company won’t sign any more contracts until August and that he only plans to hire three new clients. He hopes to start building these houses by December and has said it could take five or six months.
“As a businessman, I don’t want to turn people down,” Cook said. “I just don’t have any other options right now. ”
Can the solutions come soon enough?
If Knoxville’s housing supply is not replenished, the region’s affordability and economic growth are at stake.
“If there isn’t enough housing then what’s going to happen is (…)” I don’t think it’s good for the community as a whole, and it’s certainly not good for businesses that set up shop here. “
The 2020 Knoxville-Knox County Planning report indicated that the number of residential building permits was down 9% from the previous year, but up 18.5% from 2016. Brooks estimates that the construction is on track for continued growth, even after the strong increase in demand this year. Cook isn’t so sure.
“We’re in such a hole right now, we can produce homes at the rate we’re building today and we wouldn’t be getting out in five to 10 years,” Cook said.
Accelerating residential construction will require policy changes from the local government, commitment from construction companies and investment from stakeholders. Brooks said it will take creative thinking to get there.
“Part of the solution lies in new considerations on mixed housing,” Brooks said. “Fully meeting the demand with single-family homes may not be an achievable, realistic or desired future. “
Knoxville-Knox County Planning is working to make construction more accessible and affordable with the Knox County Comprehensive Land Use and Transportation Plan, which was announced in May.
The plan will guide land use and transportation decisions for the next 20 years, identifying areas of Knox County that should be preserved and those that are suitable for growth.
Hancen Sale, director of government affairs and policy for the Knoxville Area Association of Realtors, has proposed ways in which governments could address the housing shortage and make it easier to build homes.
- Lower permit fees and embrace the expedited review, especially for homes under $ 250,000.
- Develop vocational technical education and apprenticeship programs in public schools to increase the supply of skilled labor.
- Prioritize overzoning to increase residential density in employment, retail and public transit corridors.
- Encourage the conversion of older or underutilized commercial spaces for adaptive reuse and residential use through tax credits and other means.
- Eliminate or reduce mandatory parking requirements along transit and commercial corridors.
- Build a database of vacant, abandoned and deteriorated properties and reduce barriers to their revitalization.